Saturday, April 28, 2007

Sky is Falling...

According to this article, Jeremy Grantham believes the sky is falling.
"The bursting of this bubble will be across all countries and all assets, with the probable exception of high-grade bonds," Grantham warned. "Since no similar global event has occurred before, the stresses to the system are likely to be unexpected. All of this is likely to depress confidence and lower economic activity."
But, plenty of hedging is done as to the timing of the fall.
As for timing, he (Grantham) concedes that's impossible to predict. But here's the kicker: Even Grantham thinks you probably need to be bullish right now. The reason? Most bubbles, he notes, go through a short but dramatic "exponential phase" just before they burst. Like Japan in 1989 or the Internet in early 2000.
How does this type of prognostication help anyone...I asks ya's?

Grantham's bold statements and subsequent hedging of bets is something a lot of market pundits do. This allows them to zig and zag at the same time. If the market goes down big, Grantham claim's victory. If the market goes up big, Grantham claim's victory. A win-win scenario.

This type of hedge may prove useful in other pursuits. For example, wouldn't it be nice to lead a programming project and hedge the timeline of the project?
Yes, we will make the May 1st deadline unless we don't.
The above statement doesn't work because it's not wordy enough. Too simple...straight to the point.
We fully expect to meet the May 1st deadline. All components have been reviewed, tested, and verified to meet our stringent requirements. But, there is always the case that problems may arise due to circumstances outside our control. These problems may impact our schedule and possibly result in extending the deadline.
There, that's better. A great hedge!

Well, that's it for me this Saturday morning. I'm taking my daughter fishing today. Of course, the fishing trip may be delayed or cancelled if changes in the Earth's atmosphere produce drops of water from the sky. ;-)

Later Trades,



Philip said...

neiderhoffer had a great chapter in his classic book about oracles and how full of bull they tend to be... he deconstructs the dynamic pretty welll... great stuff taylor... i thght the same thing about the grantham article when i saw it as well... tx. p

Michael Taylor said...

Thanks Philip. Dead on in regard to neiderhoffer. He has written some great stuff on market sirens.

Take care,